Commercial and multifamily mortgage loan originations set a record during 2003, according to the Mortgage Bankers Association. The $116 billion in loan originations reported for 2003 were up by more than one-third from the $86.4 billion reported in 2002.

MBA also reported that loan originations in the fourth quarter were the highest ever recorded in MBA’s quarterly survey. The fourth-quarter total of $37.9 billion was $8.2 billion above third-quarter 2003 volume and $7.9 billion above fourth-quarter 2002 volume. 

“The combination of the strong relative value of real estate as an investment, plentiful capital, continued low interest rates and the quickened pace of the economy’s recovery fueled loan demand,” noted Douglas G. Duncan, MBA chief economist and senior vice president, research and business development. “The commercial real estate finance business should remain strong as we enter 2004, given our forecast of continued solid economic growth and moderate increases in credit costs.”

The increase in commercial/multifamily lending activity during 2003 was across all property and investor types. The $29.6 billion increase over 2002 included an $8.9 billion increase in multifamily loans, a $7.5 billion increase in office loans and a $5.4 billion increase in retail property loans. Among investor types, conduits had the largest increase at $10.5 billion, while commercial banks increased by $7 billion, Fannie Mae increased by $3.9 billion and life companies increased by $3.3 billion.

Conduits also purchased the largest share of loans originated during 2003. The $37.3 billion originated for conduits represented more than 32.1 percent of the year’s total. The life company volume of $23.4 billion was 20.2 percent of the total, the combined Fannie Mae and Freddie Mac total of $21.2 billion was 18.3 percent of originations and the originations for commercial banks was 15.6 percent of the total.

Multifamily lending of $49.9 billion represented 43 percent of total originations. Federal Housing Administration–insured (FHA-insured) lending rose by 35 percent to a total of $4.4 billion for the year.

The largest percentage increase in commercial mortgage lending was for hotel/motel properties, where the $2.8 billion in originations for 2003 represented a 111.7 percent increase from 2002 volumes that were low in the aftermath of the Sept. 11, 2001, terrorist attacks.

The $8.2 billion increase in lending activity between the third and fourth quarters of 2003 largely reflected the industry’s usual push to finalize deals before the end of the year. The quarter-over-quarter increase was driven by a $3 billion increase in multifamily lending and a $1.7 billion jump in office lending. The gains were widespread among investor groups, with six of the nine categories increasing in excess of $1 billion from the third to the fourth quarters. 

The $37.9 billion of commercial and multifamily mortgage originations reported for the fourth quarter were up $7.9 billion from the fourth quarter of 2002. Office lending increased $2.6 billion from a year earlier, while retail lending increased $1.1 billion.

Among investor types, the largest increases in the fourth quarter of 2003 versus the fourth quarter of 2002 were $3 billion for commercial banks, $1.5 billion for conduits and $1.4 billion for Freddie Mac.

In the multifamily sector, the $7.8 billion of loans purchased by the two government-sponsored enterprises Fannie Mae and Freddie Mac represented more than 50 percent of the multifamily loan volume in the final quarter of the year. In comparison, Fannie Mae and Freddie Mac accounted for 42 percent of the multifamily volume in the fourth quarter of 2002.

FHA-insured lending activity was $1.1 billion in 2003, an increase of 31 percent increase over the same period a year earlier. 

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